Cooperatives Bill will assist small business ventures…..

The Cooperatives Amendment Bill, promoted by the minister of trade and industry, Dr Rob Davies and perceived by him as a critical legislation in the development of black business enterprises and rural development, has finally been approved by the National Assembly and no doubt will added to the statute book early in the New Year once concurrence is received by the NCOP.

Seen as integral part of New Growth Plan

Cooperatives represent a key aspect of the department of trade and industry (DTI) contribution to the New Growth Plan and DTI sees the new law as a major contribution towards the creation of jobs, poverty alleviation and economic growth.

Originally, two separate bills were tabled in parliament in May, one to deal with provincial issues known section 76 bill and the other as section 75 but eventually, for ease of legislative process and the necessity to speed up matters, a joint-tagging decisions saw both Bills combined as a result of a specialised committee report.

Much debate and long hearings

The bill has seen extensive hearings from many parties; alterations as a result of experience in other countries and the learning processes of the cooperative movement so far in South Africa, black co-operatives being in their infancy and white farming co-operatives having contributed to growth in the more developed areas of agricultural sectors for many years.

One of the primary aims of the legislation, the consolidated Bill states, is to create a co-operative agency to lead to a re-vitalised and more comprehensive co-operative movement in South Africa, establish a co-operatives tribunal to handle conflicts, disputes and to ensure compliance.

Government cooperative agency to assist training

A secondary objective of the agency would be to establish in the future and training academy and an co-operative advisory council to build the movement in field operations and development the potential of black emergent business.

Fronting control not passive participation is aim…..

Department of Trade and Industry (DTI) has published a notice stating that it has tabled a Broad-Based Black Economic Empowerment Amendment Bill before Parliament, the eradication of “fronting” being perceived as one of the main objectives of the proposals.

In a statement released at the time, the amendments seek amongst other things to establish a B-BBEE commission “to deal with compliance” in respect of B-BBEE-related legislation and strengthen compliance-related monitoring and evaluation and providing for offences and a maximum penalty.

On the issue of fronting, DTI have referred to in a number of documents issued by the department, although by now suggesting criminalization of the issue a clearer legal definition is going to have to be found, commentators have noted. DTI in the past has said that any process of black participation in business must result in an increase in the ownership and control of the economy by black persons.

The BEE scorecard currently being used by business gives points for direct empowerment which focuses on black ownership of enterprises and assets through shares and other instruments that provide the holder thereof with voting rights and economic benefits, such as dividends or interest payments.

Control means, according to DTI in their BEE statements, the right or the ability to direct or otherwise control the majority of the votes attaching to the shareholder’s issued shares; to appoint or remove directors holding a majority of voting rights at meetings of the board of directors of that shareholder and the right to control the management of that shareholder.

DTI has been particularly vocal on the subject that passive ownership by black people is in itself not sufficient to bring about “transformation” or where investors have very little control over the direction of investment decisions made by fund managers. Such passive ownership of enterprises can also lead to a form of ‘fronting’ “and this needs to be guarded against”, says DTI.

Minister of trade and industry, Dr Rob Davies, has referred to this matter and further consequences of the new Bill in a number of DTI press statements recently and conferences he has addressed.

The Bill also contains more regulations to control B-BBEE verification agencies involving an independent regulatory board of auditors is also part of the minister’s proposals contained in the Bill and the provision or creation of incentive schemes to support black-owned business. The Bill is notable in that it follows the BEE scorecard principle of specifically defining a “black person” as Africa, Coloured or Indian.

A draft bill was published for comment and no doubt the portfolio committee on trade and industry will announce public hearings before the committee in the new parliamentary session of 2013. The Bill as tabled is available on the DTI website.

SETAs report to Parliament with training skills update.

On the subject of fracking and in a presentation to the parliamentary portfolio committee on energy by the Chemical Industries Education and Training Authority (CHIETA), parliamentarians were told that major objectives included providing the necessary skills for jobs during the possible exploration for shale gas in the Karoo.

They were also to be part of the exploration process for gas where alternative energy employer were providing jobs and there was a promising outlook for new jobs with specialised skills which CHIETA could provide.

CHIETA is the statutory body established by the National Skills Development Act, through the Department of Labour, one of twenty three SETAs currently carrying out sector education and training authorities in SA, each being responsible for promoting economic and social development through learnerships and skills programmes.

Gas exploration also under consideration

CHIETA told parliamentarians that the subject of gas exploration and possible new skills needed to develop off-shore gas resources along the West Coast SA and also mentioned also the need for training and skills in upgrading of refineries “to meet new clean fuel standards”. The skills needed “ in consideration of building a new refinery to reduce dependence on the import of refined products” were discussed.

Skills development levies from the petroleum industry at a figure of 95,000 persons far exceeded any other of the category of employer in CHIETA, which ranges from fertilizer to pharmaceutical groupings, of which there were 116,826 employees.

Simple trade related skills represented 50% of the shortfall in the petroleum industry, other than senior professionals who represented another 40%. The presenter talked of an integrate training process that was conducted between SAPIA, the department of energy, CHIETA itself and Johannesburg (Wits) University.

Other training groups report

Two other SETA’s briefed parliamentarians in the form of the Wholesale and Retail SETA who has some time ago signed an MOU with major training group MERSETA and arranged transfer from the latter of 3,256 levy paying companies whom they assumed responsibility for, developing a manual to accommodate fuel retailers downstream.

The levies transferred amounted to R26.9m, transferring also the NQF level 2 National Certificate Service Station Operations qualification and numbers trained with joint exercises with the fuel sector and with grants, amounted to clerical and administrative workers-227; community and personal service workers-130; elementary workers- 866; machinery operators and drivers – 202; managers- 610; professionals– 62; sales workers– 9,559; technicians and traders workers- 259, making a grand total of 11, 915 persons trained.

The Local Government Sector Education Training Authority (LGSETA) said that their programmes were mainly focused on water and waste water treatment with a total 1795 candidates trained in 8 provinces. An electrical training school has been established.

In the same series of presentations, the committee heard from the grouping “Woman in Oil and Energy” presented by Mthombeni Moller .

SAPIA reports for the liquid fuels sector

A briefing by SAPIA on transformation in the liquid fuels industry noted that it was the view generally of the fuel sector that the recently introduced and revised BEE scorecard “made sense” but in welcoming the new BEE amendment bill added to anchor B-BBEE legislation, they gave a warning to legislators and department of trade and industry that whilst penalties might stop “fronting”, the whole process of criminalising such aspects of business development might have “unintended consequences”.

The industry representatives said that the concept of a BEE commission was welcomed for a number of reasons and they told parliamentarians that SAPIA’s plans for the future included an advanced certification in management for oil and gas aimed at middle management persons in transition to senior posts and for trainers to impart to these people specialist knowledge in the oil and gas Industry.

SAPIA called upon the department of energy to take the lead in developing a number of issues in sector transformation including a proper BEE framework for all to work to; revised B-BBEE codes for the sector and technical assistance guidelines to work with that were more specific on certain issues.

Department reports to Parliament on energy plan.

It must be understood that the integrated energy plan (IEP) for South Africa was going to be a “simplistic representation of a number of possible future outcomes encapsulating the state of energy demand and supply that could materialize in light of current policies and macroeconomic trends. The IEP will not be a representation of a most likely energy future.”

So said Ms Tshidmidzi Ramendozi, chief director, energy planning, department of energy (DOE) when addressing parliamentarians of the portfolio energy committee on the state of the IEP, where the DOE had arrived at in terms of producing such a plan and when it was likely to come about.

Under questioning Ramendozi estimated a final draft in the hands of the cabinet by the middle of 2013.

The development of an IEP was envisaged in a White Paper on Energy in 1998 and the minister in terms of the National Energy Act of 2008 was then mandated to develop and publish such an IEP on an annual basis. The purpose of the IEP was described in the Act “to provide a road map of energy policy and technology development future energy landscape in South Africa to guide future energy infrastructure investments.”

Seven test cases would be studied in the current exercise, Ramendozi said, which would indicate what could happen if particular actions were taken. She was at pains to point out that such test cases were not really scenario planning exercises, which would have allowed for outside forces or factors over which DOE or those associated with energy generation had no control.

Major factors within the ambit of the planning exercise, she said, for projections in the IEP, were the original energy White Paper; the 2010 integrated resources plan; the national development plan; the new growth plan; the national climate change response paper; the national transport master plan; South Africa’s beneficiation strategy and the proposed carbon tax policy.

From this base, for which DOE had to make certain assumptions on GDP factors forecast in the 2012 budget, was to take a middle, moderate growth scenario out of low to high growth patterns, and assume a certain amount of skills restraints into the future. It also had to assume global oil price projections from the Energy Information Administration and, also to be accounted for, were international projections from the annual energy outlook documents of 2012 in order to establish some sort of formula to go forward.

Assumptions for various test cases could then be undertaken, Ramendozi said, with or without the new nuclear build programme; in one case with existing nuclear structures and one without and mothballing existing structures. Such would form the basis in test cases one and two.

Then came test cases three and four, at which point Ramendozi referred to the national development plan which had presented a number of factors which had to be borne in mind although these directly affected the integrated resources plan (IRP) and were incidental to the IEP under consideration as far as test cases were concerned.

These factors were that as a net importer of crude oil, South Africa was very much a taker in the oil market and susceptible to fluctuating prices. Also to be considered were the new fuel specifications being considered and the fact that refineries were to be re-equipped to capacitate such and that South Africa would no doubts continue on its path of intensive use of fuel-powered vehicles but improving its national transport system generally.

She noted the options in the national energy development plan, as far as liquid fuels were concerned, and these were as DOE saw it – to build a new oil-to-liquid refinery; build a new coal-to-liquid refinery; upgrade existing refineries; import more refined product or build or buy a shareholding in a new refinery in Angola or Nigeria. All this had to be considered at this point of the running of test models.

Turning to test case three in the process, Ramendozi said this included expanding existing refineries with greenfields operations. Test case four included upgrading or expanding refineries and possibly, in addition, increasing importation of refined product, allowing for consequent upgrades of port infrastructure and associated costs such as transportation.

Test cases five and six, DOE noted, included the issue of carbon emissions, which was based around South Africa’s international commitment to reduce emissions by 34% by 20120 and 42% by 2025. Factors to be considered were the findings of the long term mitigation exercise involved at the time which had established that South Africa’s energy use emissions constituted 80% of all emissions, 40% of which, a majority on a comparative generating basis, arose from the generation of electricity.

Test case five, Ramendozi said, therefore involved the issues of refurbishing the existing “fleet” of generating plants to meet targets set by the department of environmental affairs (DEA). This would produce a result for this test case.

However, there was little doubt that such a “retrofit plan would still leave demand outstripping the supply of electricity” so that, as per test case six, the plan to be modelled would involve “South Africa mothballing its (coal) power plants and investing solely in new technologies as a substitute.”

Ramendozi concluded that the issue of carbon tax finally arose in test case seven. Here, the impact of carbon tax on the choice of energy technologies throughout the entire value chain had to be considered, bearing in mind the DOE was aware of a current proposal to tax emissions of CO2 @ R75 per ton of with an increase of around R200 a ton.

For this modelling exercise and still to be completed, she said, was quality checking of the data collected; the actual configuring of the base for the test cases; subsequent analysis and evaluation and then the final report writing.

Stakeholders would be consulted before a draft report was issued, the draft report being considered first by cabinet before the draft became public.

MPs commented that quite obviously things were still therefore at a very early stage and were surprised that the DOE paper at this stage gave no evaluations of each energy source and no comments on job creation or job losses or skills so far reached. Ramendozi replied to this, and a number of other similar questions on energy resources, that parliamentarians were confusing the IRP, which dealt with resources and the effects and consequences of their use, with the purpose of the IEP.

It was not the job of the IEP to evaluate and decide upon the quality of resources and their use or not.

The IRP was very much on the subject of electricity energy, she said, to repeated and similar parliamentary questions on coal issues and the future of coal as a primary industry. Questions on gas reticulation and exploration off the Mozambique coast and what PetroSA were planning, for example, and similar issues in the hydrocarbons area, she noted, similarly involved specific resource evaluations and this was not what the IEP was about. She said the job in hand which looked at the whole sector in a broader sense.

“For example”, Ramendozi said, “when looking at the transport master plan it becomes quite evident that whilst improving rail transport systems, a knock-on result in a broader sense would be a swing perhaps from road to rail, meaning a different call upon the rail electricity need. This would be an IRP issue, however.”

This should answer many parliamentarian’s questions, she said, why there was so little to be said in the IEP on the specific issues surrounding liquid fuels in the planning process.

The IEP was to be a road map and the process leading to building such a plan would yet have to “unpack” many of the issues surrounding energy and the economy from a macro-economic viewpoint. Such macro-economic issues as job losses and the use or over-use of water, for example, would indeed be in the considerations for individual test case models.

“This is going to be a particularly difficult aspect of preparing the IEP”, Ramendozi said, “because it involves cross-debate with many government departments, including treasury, environmental affairs, labour, health and transport, for example, and the final document needed to be both visionary and re-active to findings and take into account policy matters that had been adopted as courses of action”.

“What the IEP will not be”, she said, “is another IRP which evaluates resources but rather a document which will consider test case models, with or without certain weightings, based on inclusivity or excluding issues, and also to incorporate known supply options with given macro-economic factors.”

She commented, in reply to questions on the effect of carbon tax, that this would indeed be a “challenge” to assess, since whilst MPs saw this as an effect on the purse of the individual, DOE’s thinking on this at this very early stage might be to take the treasury viewpoint that the effect carbon tax could be countered by incentives in the system in the form of allowances, before costs reached the individual.

On augmenting the IEP with the liquid fuels strategy, Ramendozi said, that here again DOE was more concerned with producing transportation and demand factors at this stage. She said, in a similar vein, when asked about the Mathombo project, that her department could not even talk the need for a new refinery, “until we start running the various test case models”.

On questions regarding fracking and gas exploration activities in the Karoo, Ramendozi responded, “With all the geological and logistics issues facing fracking, we are hardly even considering this contribution in terms of the time frame of the IEP. We do not see Shellgas playing an effective role in the energy picture in the immediate future as far as short term test cases are concerned”.

She told parliamentarians that one of the test cases included natural gas related to electricity needs, compared with to gas to liquid technologies. However, she said the whole exercise was not to consider one resource against another but how to complement resources into a common system.

The IEP, she said, “must take on board government policy towards the environment, attitudes toward climate change and therefore such issues and water and water resources used in coal fired plants will have to be considered. However, social issue answers are not something that will come out of the IEP”, she told parliamentarians.

In many cases we see the final IEP highlighting many issues but not addressing their manner of implementation”, she concluded.

Ramendozi said that in terms of producing the IEP, DOE would consider a reserve fuels margin of 19% and when asked as a final question by an MP what DOE were “going to do about the elephant in the room – the growth rate”, she responded that DOE had to follow exactly what treasury were stating for growth “otherwise all other related data would not make sense”.

Chair, Sisa Njikelana, concluded by saying the IEP presentation was the final document in an “important parliamentary year on energy matters,” stating that DOE had to get the concept behind the IEP right in their minds “before it moved into the nuts and bolts of the various test case issues”.

He said that the energy committee was to put on whole host of questions in writing to DOE based on a forthcoming parliamentary summation of the situation so far on the IEP, and this would be an exercise undertaken once parliament re-assembled in the New Year.

Transport legislation to be revised.

In a written reply to a parliamentary question on the subject, the minister of transport, Ben Martins, says that his department of transport is considering setting up a single transport regulator to consider all matters relating to tariffs; the protection of the public as far as transport matters are concerned and to consider the revision of a number of regulations.

He emphasised that lessons learnt from the energy and communications sectors showed that regulators should be incorporated into the transport process itself and the “the new model might entail merging several economic regulators currently operating in the transport industry into one”.

According to the minister, he will now have an investigation commenced which will look at regulation of tariffs across the transport sector; regulations regarding quality of service and matters regarding the protection of the public interest.

“Predictable tariff structures had to be put in place”, he said.

Minister Martins reply included the fact that necessary regulatory and legislative framework would be in place by 2014 to allow for the setting up of a single transport regulator, who would then be responsible for all transport infrastructure pricing including roads, aviation, rail and maritime matters.

The proposed regulator would be created via legislation and a position paper was to be drawn up by the end of the first quarter next year and draft legislation to follow.

He concluded that the idea was also to provide a better climate for investors.

Manufactured goods industries struggling with rising costs.

Manufacturing Circle, CEO, Bruce Strong, told parliament that with electricity costs increasing 170% in five years but other BRICS countries decreasing such as Brazil by 28%, the SA purchasing managers index was at a three year low with a volatile rand exchange rate bring uncertainty to any investment plans. Electricity charges had to have a more gradual cost increase trajectory, he said, or there was serious trouble ahead.

Worse, municipal charges had no relation to Eskom charges and this had to be attended to, Strong added.

His statements came in hearings on the department of trade’s (DTI) industrial policy action plan (IPAP) and Strong added his voice to that of MPs that the National Energy Regulator of South Africa (NERSA) should interrogate Eskom price increases more harshly; that municipal mark-ups should be investigated and that electricity discounts had to be considered if manufacturers were to survive.

On the first day, much of the debate surrounding the progress report by DTI on IPAP progress to date. The debate surrounded not only the usual discourse on tariffs, government departmental policy on preferential procurement (PPPFA) but on re-orientating South African exports away from traditional markets to high growth countries.

A noticeable shift to open discussion on South Africa’s port and harbour problems was very much discernible, other than the expected focus on electricity charges.

DTI’s acting deputy DDG for industrial development, Garth Strachan, told parliamentarians that the need to maintain lower port handling fees was at the moment much countered by high financing costs of port infrastructure development, particularly in the area of rail. Transnet could not disassociate its charges from the urgent need to re-equip in areas of dockside upgrading and rail facilities.

He admitted that South African port charges were amongst the highest in the world, well above global norms particularly on manufactured goods but nevertheless port pricing on iron ore and coal was below the global average. Transnet was deeply involved in increasing flow with new rolling stock which fact was welcomed by opposition members

DTI in their presentation pointed specifically to the renewable energy independent power producer procurement (REIPPP) programme where two rounds of renewable energy generation bids had been awarded with minimum levels of local content ranging from 25% to 45%.

“Green industry achievements included the IDC approval of funding of solar water heater manufacturing and the launch of the energy efficiency programme, DTI said.

Clothing, textiles, leather and footwear, canned vegetables, set top boxes and pharmaceutical products had been the subject of PPPFA revision, it was noted, and new designations for school and office furniture and cables and other capital equipment was in the pipeline. Strachan said the industrial participation programme (NIPP) was just about to be re-formulated which would “help the shift to direct offsets in key IPAP sectors” now that the NIPP policy review had been completed.

On financing, Strachan said IDC was also going to lower the cost of funding for businesses, by sourcing an additional R2 billion from the UIF for funding more labour intensive businesses and so far, IDC had claimed that jobs created or saved through funding approvals from 2009 to this year was well over 111,000.

Looking ahead with the protracted recession and slow demand for South Africa’s exports, the challenge was the exchange rate overvaluation and volatility with high relative real interest rates. Strachan said that the “user pay” principle for funding electricity build programmes was inducing massive economic shocks to the manufacturing sector.

There was also the challenge of pricing by monopolies in primary industry and supply of intermediate inputs into manufacturing. In response to questioning on breaking this control up, Strachan responded by stating that the role of large companies in manufacturing in terms of demand and supply in a relatively small to medium economy was significant and that small enterprises in most cases benefitted from the value chain.

This was bearing in mind that the capital costs of such projects were so huge that it was an unlikely small and medium businesses would proliferate under these conditions.

Over the following two days, hearings on the IPAP were conducted and interesting comment was received from the Manufacturing Circle, made up of a number of South Africa’s major medium to large manufacturing companies from a wide range of industries, some of them exporters.

Bruce Strong, CEO of Manufacturing Circle told parliamentarians that for a sector that employed some 1.7m people and accounted for 15% of GDP it was not good that the sector was stagnant and had lost 300 000 jobs because of the recession.

Municipal electricity charges did not reflect the Eskom’s price increases and it was required that NERSA had to be more aggressive on Eskom price increases. Control was required on municipal electricity price increases in particular. Generally he said, the resources of independent regulators had to be upgraded and a benchmarking analysis of their abilities looked at.

Strong called for a national “fiscal review” on the funding of public infrastructure projects. His circle of companies had responded to various of DTI’s incentive programmes but no successful application by manufacturers to the jobs fund had been reported.

There was a crisis in manufacturing, Strong said.

The Competition Commission in their submission, added IPAP did not seem to support the establishment of a sufficient number of small and medium businesses and the problem as they saw it was that “large firms or monopolies ‘owned’ their customers and spawned low levels of investment as there was no need to invest because there was no rivalry. MPs added the point that legislated monopolies seemed to be shutting down the economy.

DTI responded that indeed the “ bunched up” escalation in electricity price increases was hurting the manufacturing sector. But the emphasis on the supply side and Eskom’s build programme that had led to the original Multi Year Price Determinations of a 27% increase, with municipal customers being subjected to tariff loading had led to triple digit non-tariff surcharges.

Some municipalities appeared to be using electricity tariffs to generate revenue, Strachan said and Strong noted that places in Mpumalanga that were served by Eskom had electricity 20% cheaper than those served by the majors. MPs added the point that in some cases, for example Johannesburg and Tshwane, a charge of 700% above Eskom’s prices was made.

DTI recommended that an intra-governmental task team examine the impact of escalating electricity tariff increases; short term measures be applied to vulnerable sectors; there was a need for one national set of tariffs; there should be single digit price increases; carbon taxes be approached with caution in the current climate; and companies be supported in recapitalising with energy efficient technologies.

MPs commented at this stage that it appeared that radical responses were needed to be done or IPAP would become a welfare system for failed businesses and pointed again to “ridiculous” electricity surcharges imposed by some by municipalities. Such a discourse by DTI was needed.

DTI’s main platform however on the issue of a deteriorating situation was the economic situation resulting from the global recession, rather pointing to the fact that although government automotive investment programmes had been successful, the production of cars had been seriously affected by the international failing markets. Exports to the European Union remained negatively affected and there had been an increase in vehicle imports at the same time.

Strachan said that 80% of the bodies of medium and heavy commercial vehicles now have to be assembled in South Africa, with the drive train and engines to be shortly included. DTI was extending investment support for the assembly of semi knocked down vehicles, he said, and was working with IDC on finance programmes trucks and buses but the market was, nevertheless, small.

The department said the clothing and textiles sector accounted for 120 000 jobs and 11% of manufacturing employment. The sector had a turnover of R35bn which was 2.8% of GDP and there were 2 000 active companies in the sector. While the production in clothing had declined, there had been an increase in the production of footwear.

DTI pointed to the fact that many of the MPs questions and answers in the business hearings were outside of DTI”s function or core business but it could see the danger it posed and recalled that there had been the stalled REDs initiative to secure efficient distribution of electricity.

Looking ahead, Strachan said shale gas whilst not in DTI’s sphere, it seemed quite obvious that the east and west coasts of Africa contained enormous opportunities for the oil and gas industries and also South Africa had a competitive advantage because of its mining history. South Africa should focus on localization and the lifting of constraints at ports accordingly, it was noted.

Strachan noted that there was an opportunity for Saldanha to be an oil and gas hub but progress had been slow. If shale gas became a reality it would double the potential of Saldanha.

Changes made after parliamentary hearings.

Department of transport spokesperson Tiyani Rikhotso told a media briefing on e-tolling ecently that the portfolio transport committee was to completed two days of public hearings on e-tolling and the Transport Laws and Related Matters Amendment Bill in Parliament. As a result Parliament has given notice for the matter to be brought before National Assembly with certain further changes scheduled.

In hearings that took place within the portfolio committee on transport under Adv Johnny de Lange as chair the Bill was adopted in debate, although opposition members abstained from voting in favour since caucus support on what was considered by them as possible and reasonable could not be approved in the light of time restraints, this being the reason given.

The Bill, subject therefore subject to final approval by Parliament still stands, as does the issue of e-tolling on a national basis.

“The matter has been postponed for for further discussion”, Rikhotso said, referring to the fact that the NA had yet to agree or not to the withdrawal of the Bill or whether more changes were to be accepted brought forward by the portfolio committee as a result of public hearings which took place and further possible debate.

SALGA agreeable in part

Issues at the public hearings with regard to e-tolling mainly involved the practical application and whether SANRAL was exceeding its mandate. Only two oral presentations were heard although some ten papers or submissions were circulated, including one from Business Unity SA. What is clear, however, is that despite all the argument and debate, the actual process of e-tolling will be hard if not impossible to undo.

The oral hearings included a South African Local Government Association (SALGA) submission presented by Mthobeli Kolisa, executive director of municipal infrastructure services, South African Local Government Association (SALGA) and also from Ms Jane Bennett, affiliate support coordinator, COSATU. No oral submissions were received from OUTA, although it was unclear if written submissions were made.

SALGA said its association of 278 municipalities was primarily trying to achieve the objective of ensuring that the legislation would provide for studies on the impact of the diversion of traffic from proposed urban tolled roads into local roads. These studies must address the likely congestion and resultant costs of road maintenance and traffic management, and access to opportunities for life on the part of affected communities.

The studies, they said, must form the basis for decision making regarding whether or not to toll a road, and to determine what mitigating measures were needed to address the negative impacts if the tolling was to go ahead.

Whilst SALGA supported the proposed bill it wanted to see additional clauses that also affected the mandate of the South African National Roads Agency Limited (SANRAL) and National Roads Act which called for the minister’s approval for any declaration in partnership with affected municipalities.

These had to include in their view studies on the likely impact of the contemplated road tolling on communities’ access to livelihood opportunities; local roads in terms of diversion and related maintenance and traffic management costs and for such studies to be used as a basis for public consultations and such conditions had to be written into the proposals, SALGA said.

Bennett of COSATU was of the opinion that without the Bill, the e-toll would not be able to proceed and suggested strongly to parliamentarians to take the decision to reject the Bill. She said the issue of a Bill to make e-tolling possible had been rushed through as an afterthought, just to make the matter legal and that it ran counter to a number of basic principles of law, not the least the National Credit Act.

COSATU maintained there had been “little sincerity in the consultation” and tolls like the Gauteng Highway Project and others in the country, no doubt to follow, would add a huge burden to the already impoverished poor. There was also a suggestion of profiteering, she said. However the overall feeling of the portfolio committee was that the COSATU suggestions were insufficiently persuasive to halt national road development on a user pays basis.

COSATU raised issues surrounding the application of the provisions of the Cross- Border Transport Road Agency and the lack of restrictions on how tariff increases would be applied in future. COSATU strongly objected to the parliamentary procedure involved and which had excluded input from the provinces, meaning that the Bill had been tabled as a section 75 Bill which does not call for provincial hearings and mandates through the NCOP.

At the hearings, both the South African National Roads Agency Limited (SANRAL) and the Department of Transport (DOT) questioned the amendments sought by SALGA. They stated that the SANRAL Act already required SANRAL to inform all affected municipalities about the tolling of a section of national roads, and that this already catered for SALGA’s request.

From parliamentary papers it appears that the Transport Laws and Related Matters Amendment Bill could have been withdrawn from the National Assembly order paper at the last minute before the discussions but despite this fact, subsequent debate did in fact take place place and approval by the portfolio committee on the Bill was obtained by a majority vote. This means that whilst the legislation may be amended, e-tolling itself as a process will probably roll on providing concurrence of the National Council of Provinces is agreed in early 2013.

Parliament’s deliberations on the bill in the NA will continue in the New Year it is presumed after Parliament reconvenes on February 10, and the future of the legislation as it stands then debated further. In the meanwhile the debate will no doubt rage on at community level.

The difficulty could well be that the amendments sought by SALGA and perhaps by the portfolio committee after deliberations could affect the anchor legislation itself and more than one piece of law.

Labour broking debate continues

A new Bill has been tabled in Parliament called the Employment Services Bill which aims to regulate in the area of employment services, regulating and providing for registration of private employment agencies. One of the aims of the Bill is to provide “comprehensive and integrated free public employment services” and to “establish schemes to promote the employment of young job seekers and other vulnerable persons”.

The government gazette, in describing the Bill’s purpose, says the legislation has been designed to regulate for and facilitate the employment of foreign nationals into areas “where they are needed ….and does not impact adversely on existing labour standards or the rights and expectations of South African workers”. The Bill has been tabled by the minister of labour.

An “employment services board” is to be established to “promote employment, growth and workplace productivity” and “give effect to the right to fair labour practices contemplated in section 23 of the Constitution.”

Constitutional concerns

In terms of the Bill, schemes to assist employees in enterprises in distress and therefore to retain employment, will be undertaken and efforts made to “improve the employment and re-employment prospects of employees facing retrenchments.”

The Bill comes at a time when the furore over “labour broking”, whatever that might mean to different parties, is slowly subsiding and a more pragmatic approach appears to be the route rather than outright banning of short term work opportunities through agencies or “brokers”.

Nevertheless, the proposed legislation covers many more aspects than simply that issue. Hearings will take place once Parliament re-assembles in the New Year.

The new proposed legislation states that private employment agencies will be prohibited from “charging work seekers any fees for services rendered, unless the minister permits such fees for specific categories or specialised services” and they will be prohibited from “making deductions from employees’ remuneration”.

Private employment agencies must keep and safeguard the confidentiality of information relating to work seekers, the Bill warns, and “the labour court will be empowered to impose fines for breaches of the act”.

In the preamble, the Bill states that its purpose is to improve access to the labour market for work seekers and “facilitate access to training for work seekers, in particular, vulnerable work seekers.”

The chairperson of the portfolio committee on transport, Ms “Nellie” Bhengu, told the department of transport (DOT) that in her view by not actually giving the consumer, or the household, any portion of state transport fuel subsidies, the integrated public transport system (IPTS) plan as presented to Parliament, particularly on the subject of fuel pricing, “was not really speaking to the needs of the people.”

Although under considerable pressure to explain why government’s approach to the IPTS should not be driven by commuter subsidies, Mathabatha Mokonyama, deputy director general, public transport, of the department of transport (DOT), explained that this was not a practical suggestion. The reality was that DOT had to deal with operators, he said.

Mokonyama said the current system of fuel pricing was likely to stay the same in South Africa for the foreseeable future.

He told parliamentarians that South Africa system was to negotiate subsidies with transport operators in terms of the legal structure governing the country and explained that both the history of private bus operators in SA and the growth of an independent taxi industry had mitigated against a commuter subsidy system and had led to the current system, however ideal other proposals might be as far as government was concerned.

MPs argued that in countries such as the England, Canada, Germany Sweden and even Kenya, such systems existed and citizens could purchase open tickets across of whole range of forms of transport and commute therefore at lesser costs to their already strained household budgets.

All is not well in the transport system in South Africa, DDG Mokonyama admitted to the committee, “and we cannot not hide from this fact. We are dealing with up to forty years in backlog of capital items, particularly rail rolling stock”, he said.

He told parliamentarians in the portfolio committee on transport that the proposed integrated public transport networks (IPTNs) in SA, some partially implemented and some still in planning, involved the integration of local rail, bus, mini-bus, taxi and “on-demand” services, and also to which link long distance services such as air, train, coach and midi-bus taxi were tied in.

Current constraints, as were well known, included lack of pre-travel information, poor sidewalks, badly maintained directional signage, lack of vehicle destination information, lack of real-time travel information and lack of safety.

Whilst the public may appear to prefer private transport, in census results this only came about because of the lack of public systems, the public being aware of the very poor maintenance aspect to bus and coach services, insufficient rail alternatives and no provision for cycling.

97.5% of the vehicles used for transport were acquired in the ‘fifties, DDG Mokonyama said, and effective vehicle mobilisation and surbanisation of the population only occurred in high and relatively high middle-income groups. Added to which problems it was to be noted that approximately 3.1m RDP housing units had been “inappropriately” located, he said.

Poor planning at local government level had exacerbated the problem, he said, and when questioned by MP Ian Ollis (DA) which came first; building a housing area near a rail line or insisting a rail line is taken to a housing area, the answer came from DDG Mokonyama that DOT worked through the integrated planning committees, some of which worked well and others not, but nevertheless that DOT could only recommend, not give instructions. He said he understood what Ollis was saying.

DOT noted with statistics that whilst London, Jakarta and Paris handle slightly over 30 million people in a sprawling areas in total area probably equalled by Gauteng (Jhbg, Benoni, Brakpan, Sandton etc). The situation was not the same just because of geographic size.

Although apartheid and forced removals had started the decentralisation, distance problems with urban sprawl were much of the problem and the urbanisation of millions of potential commuters from rural areas to cities had completely altered the scenario and made any comparisons irrelevant.

The commuter impact, he said, of the this “sprawling” in SA was high peak rushes and a “tidal flow” demand pattern, leaving vast amounts of transport idle for three quarters of a working day, coupled in SA particularly with “patchy” weekend services which also did not happen from a comparative viewpoint in many countries. Many developing counties worked through a seven-day week.

Mokonyama said DOT had identified the short distance commuter transport bus system known as BRT (Bus Rapid Transport); high quality long distance bus services and what was referred as “rapid rail”. All three were as critical elements of the department’s IPTN but stated there were “the municipal situations that warranted an intervention.” He did not expand on this.

He confirmed earlier survey reports that South Africa “had a poor public transport system” and 31% of SA households had access to a car – the “split” for travel to work being 32% for car travel; 23% of people walked to work and 25% used a taxi. The number of persons using bus and train only amounted to 15% of the total, whilst 5% used “other means”.

Meanwhile, Mokonyama said, whilst it might look like that in SA that operational subsidies given by the state were relatively similar to other countries, the vast difference in incomes compared with SA and overseas showed SA as having “cost of transport” as one of the major and highest items in household expenditure.

Statistics also indicated that whilst only 31% of South Africans owned a vehicle, operational subsidies allocated to rail and buses was R3.5bn and R4.3bn respectively for 2012 and 2013. Persons earning less that R500 a month spent 35% of their income on transport; those earning between R501-R1000 spent 23% and households earning between R1, 001 – R2, 000 spent 14% of their income on transport. On government interactions and interventions taken recently, the first approach had been the National Land Transport Act to bring about some form of regulation, infrastructure oversight and operational funding process to the situation. Following this, the main metros had been instructed to commenced integrated transport systems, which was now process of happening, he said.

DDG Mokonyama then gave a city by city report on each (IPTS), showing that Cape Town, Johannesburg and Tshwane were relatively advanced, Johannesburg’s Rea Vaya scheme from Soweto to City having come into operation in February 2011 and already had carried 1.1m passengers but labour unrest had shut down the system for two months.

The second phase of Rea Vaya to Parktown was 90% complete and the Parktown to Sandton route had been changed to incorporate Alexandra township but had not yet started.

In Cape Town, the feeder service, My Citi, was carrying 12,000 passengers per month on 42 buses, 50% being former vehicle commuters. R1.5bn was due to be spent by June 2013 to complete Phase 2 of My Citi which was in part operation. Phase 3 incorporated metro east operations and would be underway in the following two years.

An Example of an integrated system for the whole of Tshwane was shown, indicating a combination of buses, existing rail, Gautrain, the existing BRT corridor and new rail for places as far apart as Mamelodi, to Mabopane, Garankuwa and Rosslyn, from Centurion to Hammanskraal taking in the national rail line, all inked to the CBD and Hatfield in the centre. Such IPTNs were in place for most cities in SA, he said.

When asked if the Moloto Corridor programme was part of the integrated transport plan, DDG Mokonyama told parliamentarians that it was. “We are doing the analysis. Rail is so much safer than bus on open roads over a long distance and this fact has given more impetus to the plan”. He admitted that the plan had originally turned down but said this was not a wish not to proceed but that no feasibility study had been conducted.

Again ANC MPs asked why subsidies did not go to commuters but in reply, DDG Mokonyama quoted an example with Sasol and their commuters, Sasol running a bus system where they, as employers, were paying an operator a bus subsidy.

However, the union involved had demanded the sum and there were, Mokonyama said, “bad consequences for the commuter”. The department had learnt from this, he said to parliamentarians. “I would like to believe we can get rid of some of the unintended consequences by not dealing with matters in this way”, he added.

On briefing parliamentarians in the portfolio committee on energy on fuel pricing in South Africa and the planned “roadmap” for the future of liquid fuels being undertaken by government, Muzi Mkhize, DG of hydrocarbons in the department of energy (DOE), indicated that South Africa would continue on its current course of formula-based fixed fuel pricing for the foreseeable future.

He said this was DOE’s preferred option rather this than go for a “liberalised” system, such as is the case in Australia, where market forces operate within a structure overseen by a state consumer and competition watchdog.

The department’s director for petroleum and petroleum infrastructure policy, Jabulani Ndlovu, told parliamentarians that the import parity pricing system was being retained, with zonal pricing fixed according to magisterial districts.

A transport cost allowance built in based on least price working from pipeline to rail, then as last option, road delivery will continue.

Under questing from MPs as to whether Sasol would ever be allowed to operate independently and fix its own possibly lower prices, he said that both Sasol and those imported crude oil and who had built refineries locally to all had to be equated in the same pricing model.

If Sasol were to follow such a course, Ndlovu said. The consequent consumer shift would be totally beyond Sasol’s capability to supply and at the same time threaten the whole of the current national refining structure, particularly where continued investment was needed by current oil companies as far as the development of cleaner fuels was concerned. He told parliamentarians that a course involving a completely free market would never be on the department’s strategic agenda.

Ndlovu explained that the basic fuel price (BFP) was based on a parallel pricing structure, or comparison made with an “importer buying the refined product from overseas seller and transporting the same to the market place in South Africa incorporating such costs as losses at sea and landing.” It is to be assumed that he also meant to include storage costs.

However, Ndlovu said, the BFP system resulted in under and over recoveries in the light of changing crude oil prices on an agreed global market cross section and the national BFP, calculated on the first Wednesday of each month, corrected the previous month’s price differential. But then levies had to be added, he said.

This amounted to a pipeline levy run by Transnet to the interior for capital cost recovery; a levy on the quantity pumped whatever the product and a dye levy to curtail the illegal mixing of paraffin and diesel.

He then explained to parliamentarians that in addition there was a “slate” levy, a self-adjusting mechanism to finance the effect of cumulative petrol and diesel grades under recoveries realised by the petroleum industry and run by SAPIA, the petroleum association, in response to daily changes between the BFP and the petrol and diesel and price structures as announced by the state monthly as per the monthly fuel price media statements. The “slate” is cleared when reaching once exceeding R250m and re-distributed back to the industry.

On the issue of illuminating paraffin (IP) and liquified petroleum gas (LPG) the formula for each was explained, most of the problems existing, particularly in the case of IP, where products were sold on the open market and exploitation of the poor in rural areas often took place due to lack of alternative sources.

On external exported finished product, a number of neighbouring countries who bought diesel and petrol products from SA did not necessarily have the same structure of levies, Ndlovu said, accounting for the fact that sometimes landlocked neighbours had fuel that was cheaper than in SA.

On the 20-year “roadmap” that was being planned for South Africa by DOE in an attempt to ensure that the country retained access to “reliable, affordable, clean, sufficient and sustainable sources of energy to meet the country’s demand for liquid fuels”, DOE confirmed that the department was three months behind in producing such a plan.

This Jabulani Ndlovu said, was because of the “difficulty in getting data from the oil companies” but under questioning from MPs, he admitted that there has been incompatibilities in the way questions were put to stakeholders making the answers difficult to supply due in the main to a lack of understanding on how the industry worked and separation of data facts according to the question asked.

He said DOE had leant much in the process of compiling such a “roadmap” and that it was being undertaken to encourage investment, promote diversity of supply to deal better with supply disruptions and to ensure an “integrated government response in dealing with issues on liquid fuels.”

DG Muzi Mkhize promised that the plan would be released in draft form by 30 January 2013 and the final report published by 15 February. He said he hoped DOE would be undertaking a refinery audit next year.

Neither DG Mkhize nor Jabulani Ndlovu would be drawn on the subject of “Project Mathombo”, PetronetSA’s proposed refinery for the Coega port area, nor would they be drawn on how the products would reach the market, whether by pipeline or rail.

Ndlovu said that this, they understood, was still in “feasibility study stage” with an international funder and the whole issue of any finished product emanating from the Eastern Cape had not been taken into account in the “roadmap”.

Protecting the Square Kilometre Array

In answer to a parliamentary question on the subject, the new minister of science and technology Derek Hanekom has confirmed that a report is to be undertaken by the department of science and technology and the SKA project team on any possible negative effects of shale gas fracking in the Karoo.

Mineral resources minister, Susan Shabangu, earlier told the media in a press media meeting that government “will approach fracking in the Karoo in a sensitive and responsible manner”. At this meeting she made public to all the report on investigation of hydraulic fracturing or fracking in the Karoo.

Minister Hanekom’s recent response to MPs questions stated that findings of the research will focus on any negative impacts during the exploration phase and will also be used to inform measures to be put in place “for the exploitation phase.”

Stressing that the final integrated energy plan (IEP) from the department of energy (DOE) will be subject to public scrutiny and comment, energy minister Dipuo Peters, in a written reply to parliamentary questioning, confirmed that her department will shortly be producing the first set of energy modelling assumptions involving nuclear energy planning for the country and these could be out in the New Year.

DOE have told Parliament seperately, however, that the final draft of the whole IEP will not be in the cabinet’s hands before the middle of 2013, the department having now completed a full round of presentations to interested portfolio committees in Parliament on the background and preliminary work to be undertaken on the IEP. The IEP is not to be confused with the integrated resources plan (IRP) which will specifically study the individual energy resources themselves.

There will be extensive consultation before any matter on the IEP is even tabled in cabinet for approval, the minister noted. Demand forecasts have also been finalised for some time, she said, and last month “quality checks on the data had been carried out on the data supplied.”

The minister also indicated that the final full draft document with all test cases incorporated with a plan might not be in the hands of cabinet before mid-2013. As such it will be in draft form to be published for stakeholder comment.

Clearly nuclear energy is deeply involved in the IEP since the cabinet, at its latest meeting in Pretoria, has now agreed to the implementation of the nuclear build programme in time its seems for the IEP report. Working models will look at various plans with and without various resources, one of the critical resources being the nuclear issue.

A strategy to involve stakeholders in regard to nuclear build is also being worked out, cabinet says. Kgalema Motlanthe, who heads up the national nuclear energy executive coordination committee, held the first meeting of this body in August and communication has been ongoing.

Eskom has also been endorsed by the cabinet as the owner-operator in terms of the nuclear energy policy

Cabinet has now approved the second version of the draft national energy efficiency strategy, following the 1998 White Paper, published for public comment some time ago.

The South African National Energy Development Institute (SANEDI) is now clearly establishing itself as a research, evaluation and monitoring body, shedding its developmental nature at the request of the department of energy (DOE). Its main mission currently is to assist in the transition of South Africa towards a sustainable and low carbon energy future. SANEDI says it plans to become major energy research body in South Africa.

So said Kadri Nassiep, CEO of SANEDI, to members of the portfolio committee on energy when addressing them on the 2011/2012 audit recently completed by the department of performance, monitoring and evaluation (DPME) on SANEDI on its activities for the year. Nassiep said it was setting up a data base on energy efficiencies in order to establish a consolidated picture on the subject for the whole of South Africa.

DPME expressed their satisfaction that SANEDI was on target in most areas of performance and was meeting delivery service. The auditor general has given SANEDI an unqualified clearance on its balance sheet for the year 2011/12.

SANEDI, which grew out of SANEIRI when under the aegis of the Central Energy Fund, had recently launched a wind atlas for South Africa; is dealing extensively in coal research and carbon extraction: and, furthermore, on carbon capture and storage issues.

The research institute, Nassiep said, had as an objective a wish to be recognised as the foremost institution for renewable energy research coordination and collaboration.

Nassiep reported to parliamentarians that SANEDI had established RECORD or renewable energy centre of development, which was mainly dealing with wind energy issues in the Northern Cape and solar energy initiatives in KwaZulu Natal and was receiving financial assistance from GIZ of Germany.

Initiatives on “green transport” were not on track he reported, however, in the area of fuel efficiency and fuel efficient innovations in new kinds of transport. Similarly, the “smart grid” business plan had not reached the stage of business buy-in although much work had been done.

In answer to questions, he said “smart grid” involved disciplines where the national transmission grid became more reliable; more secure; more economic and more efficient by applying more modern and advanced technologies to energy distribution and would involve the technology of such groups as Siemens.

Initiatives to reduce the carbon footprint in South Africa were ongoing, Nassiep concluded, but he would not get involved in MPs questions on whether South Africa should introduce a vehicle scrapping programme, nor would he be drawn on the issue of SANEDI”s views on job losses by switching from coal to gain reduction of CO2 gases as part of the climate change debate.

In presenting their annual report and internal audit results to the portfolio committee on energy, PetroSA told parliamentarians that progress had been made on the Ikhwezi gas fields off the Mozambique coast and that four wells were originally drilled with two more recently completed, all resulting in a “sub-sea” pipeline to carry gas ashore from the platform created now being created.

The first actual operational well drilling is to be commenced by the end of 2012 and gas is expected to flow by 2013. This should extend the life of Mossel Bay refinery to 2020.

CEO, Nosizwe-Nocawe Nokwe would not confirm the size or volumes involved in the Ikhwezi project -chairperson Sisa Njikelana reminding parliamentarians that PetroSA was working in a competitive market and certain facts, especially on crude oil and gas matters, had to be withheld.

Nevertheless, she commented that PetroSA had received an “unqualified” audit opinion and generally things from a management perspective “were looking up”.

Ms Nokwe said that PetroSA’s activities in the downstream market were a “hive of activity” but from her presentations it had to be assumed by MPs attending that this was in the storage area and not in service station ownership.

When asked why PetroSA should be interested in such areas of expansion as “downstream”, as she referred to it, Nokwe replied that it was because “PetroSA had a vision of being a totally integrated oil and fuel supply company”.

A good number of the questions from MPs on the annual report surrounded the unsuccessful ventures to obtain crude oil in Equatorial Guinea where R1, 412m had to be written off in the year under review and in Egypt where R945m was also subject to a write off. The audit opinion was naturally highly critical of such ventures, referring to these as “impairments” but not “wasteful and unfruitful”, however, as was pointed out.

Also “significant uncertainties”, according to the internal audit, surrounding the sale of Brass Exploration Limited and PetroSA Nigeria (SOC) which Nosizwe Nokwe reported on as “ventures which were currently in process of litigation” and therefore, she felt, sub-judice as far as any debate was concerned.

Most of the problem with Brass Exploration had arisen because the investment was disallowable under the PFMA as the business was largely family-owned.

equitorial guinea

On further questioning by MPs, Ms Nokwe finally explained that the Equatorial Guinea venture was apparently on the basis that a partner, subject to certain conditions, had to be found in a specified period and as this had not happened, it was felt prudent to write off the exercise as the contractual arrangements appeared doomed. Nevertheless, in the last few days, such a partner has been located and the matter is being re-discussed.

The focus of PetroSA, said Nosizwe Nokwe, remained as sustaining the Mossel Bay GTL refinery and to develop Ikhwezi. Group profits had risen 54% in the year under review. PetroSA was on the project group involved and supported the quest to ascertain the viability of shale gas in the Karoo.

Crude production figures for the group were given as 0.8 million barrels which was only 50% of target, the department of performance, monitoring and evaluation (DPME) had noted, which was disappointing as Ms Nokwe said, but the challenges at the production facility were now resolved. Indigenous refinery production stood at 6.5m barrels for 2011/2.

Chief financial officer, Nkosemntu Nika, said that the small income involved was mostly generated from cash interests of the group but that a feature of the balance sheet was that it was debt-free. The crude oil market experienced some difficulties and resulted in a significant drop in storage rental income.

On the reasons for two recent trips to Venezuela and whether these had been “what might be termed as successful”, as put by the questioner, Ms Nokwe replied that indeed there had been two trips and like the Africa focus, the idea was to build relationships in markets not necessarily tied to old routine arrangements such as in the Middle East but to “forge new initiatives”.

No specific contracts or purchases were envisaged in the short term, she said, in view of the fact that Venezuela only had heavy crudes but there was no telling what could be done with a possible refinery at, say, Mathombo, Coega, she commented. SA refineries were geared to light oil requirements and Iran situation had clearly highlighted what the problems were ahead.

When asked about the possibility of PetroSA continuing with the objective defined as the Mathombo project, she said PetroSA needed a lot more support to start getting this “to the drawing board stage”. The country faced a real risk of fuel supply shortage, as stated in the PetroSA annual report, and also in the fuel energy reports contributed to by PetroSA in the past, but, like most, PetroSA awaited the results of IRP findings on energy supply requirements.

However, again she lobbied parliamentary support for a refinery at Coega.

The DG concluded that PetroSA was concerned on the declining feedstock picture and was working with Eskom on LNG development and alternatives. The tanks at Saldanha Bay were discussed, but only to the extent that spare space could be taken up for rental on the basis of what would suit PetroSA. As to their future, she said the Central Energy Fund should be asked, as they were studying the matter.

National treasury has requested input on four discussion papers on the subject of retirement, all four requesting comment by certain dates. The matter arose out of discussion between treasury and cabinet following a perceived need to promote household savings. Cabinet has now asked Treasury to follow up on the matter.

A statement from the cabinet originally some weeks ago quoted, “Final proposals will only be made after the consultation processes are completed, and will also consider how best to protect vested or accrued rights of current retirement fund members. These urgent interim retirement reform measures will complement the more fundamental and comprehensive social security reforms”.

The four technical discussion papers as part of the public consultation process expand on issues raised in the original overview document on retirement reform which went for public comment called, “ Strengthening Retirement Savings: An overview of the 2012 Budget proposals” and which was issued in May 2012.

The four itemized current papers published now and calling for input are:

Enabling a better income in retirement
This paper examines the options facing a member of a retirement fund on retirement. It deals with living and life annuities. Comments to be submitted by 16 November 2012, to Mr Olano Makhubela, chief director: financial investments and savings and the address for comment is reform@treasury.gov.za.

Preservation, portability and governance for retirement funds
This paper deals with one of the major concerns of Government, that even those South Africans who save through pension or provident funds, do not save enough for their retirement. This is because many members of retirement funds tend to cash in their retirement savings before they retire, such as in the process of changing jobs, and also spend their savings too rapidly after they have retired. Comments to be submitted by 16 November 2012, to Mr Olano Makhubela, details as above. Address for comment is: savings.incentive@treasury.gov.za

Incentivising non-retirement savings
This paper proposes various options to encourage preservation of retirement savings before and after retirement, with consideration for protecting vested rights. Comments to be submitted by 30 November 2012, to: Mr Johan Lamprecht, director: economic tax analysis. Address for comment is: savings.incentive@treasury.gov.za

Improving tax incentives for retirement savings
This paper sets out proposals for a non-retirement savings product which is supported by tax incentives. The aim of treasury is to support voluntary or discretionary savings by households and complement retirement savings and the paper enlarges.
Comments to be submitted by 30 November 2012, to: Ms Beatrie Gouws, director: legal tax design. Address for comment is: retirement.tax@treasury.gov.za.

Minister Malusi Gigaba, introducing the debate on the department of public enterprises (DPE) 2011/12 annual report, said. “We have a dual role as government departments and utilities because we have to build an understanding of why our state public enterprise components do certain things operationally and why they do certain things as a result of government policy.”

He thus indicated that at times the two may be at variance and underlined DPE’s role in harmonising the two.

He said that one of the biggest issues currently was to monitor the oil and gas companies in order to bring together a common strategic picture and obtain a better picture with data of the situation. This was the last time oil and associated products and gas were mentioned in the entire presentation, matters relating to Eskom and SOEs being of main focus.

Minister Gigaba said “Another issue is that we have had to ask certain utilities to go beyond their own plans in order to meet certain national obligations, especially bearing in mind the infrastructure programmes being embarked upon throughout South Africa.”

Minister Gigaba said that human resources issues have been at the forefront especially bearing in mind the lack of skills acknowledged generally as a national issue and in many cases obstructing SOEs from reaching the objectives set.

On objectives and targets, he was referring the measurement processes set out in the DPE annual report now assessed by the department of performance, monitoring and evaluation (DPME).

He commented that the environment on which SOEs are now operating had changed completely and were continuing to evolve almost daily. He also referred to the challenge of cost increases and marketing conditions that accompanied this.

“DPE has worked closely with all SOE’s to ensure accountability and oversight meetings are held at least twice a month”, he assured parliamentarians. “This is a robust programme in terms of meeting DPME requirements and is geared to see how all SOEs are responding to current conditions”.

But he asked that treasury in future consider an enlarged budget for DPE due to its expanded mandate as “change managers”. The total staff complement of DPE is 189 persons.

DG Tshediso Matona placed each of the DPE portfolios activity in the context of the current economic picture, which he said was important to reflect upon before one considered both the delivery service picture, an internal issue, and also matters of concern which were national issues.

Real fixed capital expenditure by the public corporations gathered great momentum during the period under review as Eskom and Transnet accelerated their spending, he said, and which was “further crowding-in private sector investment”. He was not asked to explain this by MPs.

Capital investment went up to 560bn; most of the increase of 9% over the previous year of R520bn occurring in the fourth quarter.

During the last year DPE focused on oversight practices; the business of stabilising the SOEs in terms of the changing economic picture; and looking at funding options – all the time constantly reminding the SOEs that by driving fixed investment they were unlocking economic growth.

Joint project facilities between all SOEs, particularly in the area of common procurement, had been a focus of DPE during the year, and also the issues of skills training and development. Transnet provided some 3,500 engineering-related learners and enrolled 854 new artisan learners. Eskom trained some 5,400 learners, of which 4,200 had an engineering leaning and 1,066 new artisans. SAA enrolled 254 learners, Denel 229 learners, and Infraco, Safcol and SAX had together added 191 learners.

In terms of delivery service agreements and targets, Tshediso Matona said that DPE had “largely delivered on all shareholder management functions, including signing of shareholder compacts, delivery of strategic intents and quarterly reviews as called for under the PMFA.”

Exceptions where delivery did not take place were that a shareholder contract for Infraco was not signed, since the new board stated it required more time to assess the situation and this was agreed to, and a review of South African Express was not completed on time because of a necessary restatement of financials.

In the area of energy and broadband enterprises, Matona said that achievements were the approval of Eskom’s medium term maintenance plan and implementation of the “keep the lights on” programme. An R350bn government guarantee was confirmed for Eskom and 76% of the funding for the New Build programme is now in hand. At this stage Eskom had added 535Mw of generation capacity for 2011/12 and 631km of transmission lines.

Transnet for 2011/2012 had upped iron ore transits to 1.22m tons and coal to 1.6m. Overall efficiency was claimed by DG Matona as being up 17% on the previous year. Procurement of rolling stock had started and a consignment of 95 locomotives.

SAA, which came under considerable questioning by MPs, had worsened insofar as the financial position, although five additional African routes to Ndola, Kigali, Bujumbura, Pointe Noire and Cotonou had been launched and SAA saw such Africa routes as a future area of expansion. Additional African services to Zambia, Zimbabwe and the DRC were working out of King Shaka.

Major problems in an overall sense mainly boiled down to rising fuel costs, increased international airport docking facilities and strong competition, parliamentarians were told.

Both Minister Gigaba and DG Matona responded to a barrage of questions on staffing issues at SAA and loss of market share to other airline competitors but such questions were continued out of parliamentary time and are adequately covered in the media. The minister admitted to MPs that he had been caught short by all the resignations on the SAA board and was “flabbergasted” to hear of some of the reasons.

He said the guarantee which was being obtained for SAA for future funding should, in his opinion, come attached with a requirement for a new strategic plan and a plan for a complete overhaul of the airline. A diagnostic overview of SAA is now being obtained, he said. “A consultant’s report, given to us in September, is being incorporated.”

Minister Gigaba added on the subject of SAA,”We need to work around the clock to achieve a better situation and we are addressing the staff to allay their fears. The long term vision and strategy to be produced must include a procurement plan and a network design incorporating more of Africa.

An experienced task team has to be assembled to facilitate a strategy, not try to do it themselves”, he told parliamentarians in conclusion. He admitted that there had to be a clearer distinction between the SAA board and its management team.

On general DPE issues, key areas where targets were not achieved by the department, said DG Matona, mainly lay in the area of Denel where the defence plan had not been finalised therefore stultifying any progress; Safcol, although the balance sheet had improved; and Transnet where its branch line roll out programme (on freight issues) had been held back.

The Ngqura container terminal position had not developed, neither had a national freight network plan been concluded. Also, a major issue was the future of Eskom and the IRP2 plan.

Central Energy Fund reported to the portfolio committee on energy that for 2011/2 it had importantly re-structured some of its investments and had now reached the halfway stage of what it felt essentially that an energy development company should look like.

Chris Cooper, Corporate Planner, CEF, told parliamentarians that the somewhat torrid times of the part were now behind them, have divested themselves of SANEIRI, the research body which had now become SANEDI, and they seemed to be withstanding the venture losses by PetroSA.

CEO Busi Mabuza had been advised medically not to travel and was not present. Parliamentarians asked directly if the lack of a fully substantiated and active CEO and leadership in other areas was affecting CEF operations and CEF directors replied that with team effort matters were improving, as reports showed.

Cooper said that in the CEF stable was now a stable SFF, which was dealing well with the handling strategic fuel stocks despite a downturn in storage rentals. There was Africa Exploration Mining and Finance, which was exploring for new finds of fuel feedstock and which would shortly leave CEF, going to the department of mineral resources. Also PASA, or the Petroleum Agency of SA, handling data, licences and monitoring as a petroleum agency was successfully selling its exploration data.

I-Gas which had a major interest in the ROMPCO gas pipeline from the Mozambique gas fields to Mossel Bay and SASDA which was as a developmental supplier of goods to the whole group, supplied separate reports but in an overall sense, Cooper added, and whilst small players at this stage, both companies had made important contributions.

MPs continually emphasized the need for developmental evaluations on gas off the Mozambique coast and Cooper replied that in terms of financial restraints as much was being done as possible, particularly with regard to the Ikhwezi project handled by PetroSA. He said a pipeline was already being laid from a platform to onshore at Mossel Bay.

Cooper said that by next year, CEF would see its final shape whereby the group would existing on two legs only, splitting its interests between hydrocarbons and renewable energy development. `

He noted with some cynicism that when CEF had started, it had been almost “fashionable” in the energy environment to look at and investigate the many sources of renewable energy and much time had been expended, even wasted, but CEF had done its job by sorting out, with experimentation, research and piloting and limited capital projects using what funds were allocated, what was practical and right for South Africa.

The picture, he said, was becoming clearer, particularly if shale gas was added to the possible inputs to the final formula. The Petroleum Agency of SA (PASA), a subsidiary of CEF, was involved in the investigations into hydraulic fracturing.

Quite clearly, he said, forms of solar engineering had to be undertaken in the battle to supply electricity to the poor; the need for further feedstock in crude was an ongoing issue in a country where South Africa were takers not makers; and the potential of gas supplies for energy generation, and even vehicle production, had to be followed up on.

Cooper referred to a number of undertakings in the carbon capture area and said that working was continuing mainly based on grants from overseas and which technology was being conducted onshore to save on costs and retain better control on drilling. The future potential was to undertake carbon capture in a practical senses at sea for obvious reasons.

Revenue increased 35% to R15m (2010 : R11m 2011) mainly due to higher crude oil prices and an increase in crude and finished products. Operating expenses were down 10% while profit after tax increased 39% to R1, 85m (2011: R 1,3m) largely due to cost containment measures as well as the deferral of certain projects which required more feasibility studies.

The group maintained its strong net cash position at R19m (2011: R17, 5m). The group’s financial position remains solid it was reported, with total assets amounting to R35, 3m.

Technical write-offs, in the area of PetroSA, which would be separately reported on, parliamentarians were told. The issue of reduced tank storage rentals at SFF was also a problem.

The group had received an unqualified opinion on its financial statements for 2011/2012 but DPME had reported separately and internally on the poor human resource programme which was acknowledged and being rectified; some irregular expenditure where the proper PMFA procedures had not been followed and faulty environmental procedures occurring during PetroSA operations, which had been corrected.

New board member, Rizia Jowoodeen, clarified MPs questioning on grades of crude that CEF was dealing with at one given time, particularly with regard to Venezuelan, Egyptian, Equatorial African and other adventures and said that this was a transparent issue and all worked through SAPIA to establish the correct levels of octane based on existing refinery capabilities but that South Africa had to look around and thinking had to engage alternatives to light crudes.

On strategic crude stock retention, Jowoodeen said that department of energy controlled this but there seemed a move coming to increase such figures. He said the difficulty experienced by CEF that there was no wording in the Public Finance Management Act to cover the task of venture capital undertakings.

However, risk management was a very real issue at CEF, he said, but essentially they were a developmental body and the journey to a good energy mix and energy security in the long term for SA was never going to be an easy one financially.

Two days of parliamentary hearings and weeks of debate on the proposed Basic Conditions of Employment and the Labour Relations amendment bills were based on the fact that the parliamentary portfolio committee on labour laws in no doubt that business in general, representative employment bodies and in many case government’s own utilities saw no benefit for the country as a whole if the new labour legislation, as it was originally drafted, had been passed in its original form.

The original issue that caused much of the furore was the labour broking issue but the draft Bills cover considerably more issues than just this matter alone, representing as they do, an overhaul on a number of contentious labour matters.

In well attended public hearings a considerable number of parties mostly with a commercial background complained that the Bills as they were originally proposed would in all likelihood set back South Africa’s investment programme; would probably also result in more jobs lost than gained and in many cases said the provisions were either counter-productive, unclearly defined and mostly unfair to employers, sufficiently so as to be legally unenforceable.

Now in mid-November, the Labour Relations amendments have reached a delicate stage where parliamentary legal teams are considering a final draft with most of the clauses now being agreed, particularly on aspects of workability and constitutionality. Their is a clear divide in discussions on the two issue: policy issues and legal issues and chairperson Elleck Nchabaleng (ANC) has been at pains to maintain this division as the committee has set about debate the legislation clause by clause. Adv Gordon and Adv Barbara Loots have been present at most meetings as members of the parliamentary legal team.

A major issue of recent has been wording in respect of the retrenchment of senior and higher paid employers and furthermore wording that would reflect a wish to unclog the CCMA from cases put before them. Another issue has been the matter where clauses have been so altered or new wording adopted that the sections concerned bear little relationship to the documents perused during public hearings.

The amendments to the Basic Conditions of Employment Amendment Bill which was tabled in tandem seem have reached a more conclusive stage on the subject of committee deliberation.

Among the organisations making inputs originally were the SA Chamber of Commerce and Industry, the Mr Price Group, the Banking Association of SA, the SA Society for Labour Law and the Federation of Unions of SA and Cosatu.

The main thrust of Cosatu’s presentation was to inform parliamentarians that their official stance to the committee on labour broking had been revised and their insistence that the legislation before them have provisions banning labour broking in any form had been reviewed. Also, as a consequence, they were not objecting to the process of labour broking registration.

Prakashnee Govender, the Cosatu representative, however maintained that the “real employer”, not the broker, should assume all employment obligations for the worker contracted where the work was not temporary in nature.

Cosatu also voiced the view that any trade unions should have to obtain majority support when balloting their members before embarking on industrial action, Govender stating that this constituted a “fundamental attack not only on the right to strike but also on collective bargaining” and that such amounted restrictive practices by employers.

Govender also stated that Cosatu opposed the wording that unions be held liable for damage caused during strikes but said that to allow pickets to be present on “third party premises” was welcomed.

American Chamber of Commerce who were at first was disallowed by the chair to present in their slotted programme time but subsequently allowed to present to MPs after consideration by the chair, made it quite clear that Amcham saw a great number of unintended and unfortunate consequences resulting from the Bills and called for a regulatory impact assessment prior to any such amendments. Amcham’s presentation was eventually made on a later date by a representative of General Motors in SA.

They clearly felt that it was not in South Africa’s economic interests to pursue the Bills as they stood.

AHI supported the idea provided for in the Labour Relations Act amendments of allowing balloting before engaging in a strike but noted that in their experience it would rarely be properly supervised, putting the validity of such an exercise in jeopardy. Other presentations noted that civil strife could follow such procedures as suggested.

AHI was particularly concerned that the proposals would give no benefit to small business, in fact claimed “that since the announcement of these amendments, more than 440,000 small businesses had closed their doors”.

Like most presentations, the need for some amendments were not doubted by various organisations and bodies. Most seemed to support the objectives in a broader sense but such issues as prohibition of sub-contracting; issues surrounding part-time employees becoming full time employees by virtue of the passage of time; and retrenchment conditions on higher income employees were focused upon as being counter-productive.

These were rejected as either not making economic sense, being badly worded, confusing, or, as some submissions stated, having negative or opposite effects on employment conditions. Most submissions rejected whole clauses in totality but few supplied alternative wording.

Now that two months of deliberations have taken place within the Portfolio Committee on Labour, the belief is that final drafts could be put before the National Assembly before the end of the current parliamentary session. Representing the Democratic Alliance on the labour portfolio committee is Sej Motau.

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